Why Solar Now Makes Sense For Nonprofits

Whether you operate a house of worship, affordable housing project, charter school, health care facility, or a public school, electricity is essential. Every month, you're spending money on your utility bill that could be spent on your important mission. But what if you could shrink that monthly payment and divert those funds to a better cause? This is where solar can help.

Nonprofit organizations have the most to gain from installing solar panels. With solar, you can hedge against energy costs rising 3%-5% annually while freeing funds to further your mission. With most modern solar panels having a lifespan of 30 years or more, going solar equates to decades of diminished energy expenses.  

Save up to 40% Through the Inflation Reduction Act 

Historically, nonprofits were largely excluded from the benefits of installing solar because their tax status made them ineligible for the lucrative 30% solar tax credit. 

Things changed dramatically in August 2022 when Congress passed the Inflation Reduction Act. Under this legislation, nonprofits are now eligible for a direct payment of up to 40% of the solar energy system cost. This is broken down into a flat 30% rate with an additional 10% available if your property is in a low-income neighborhood. Moreover, this is a guaranteed payment not tied to a tax liability.

With this new structure, nonprofits can reap the benefits of clean and affordable solar energy. Read on to learn more about this new opportunity for your organization.

Nonprofit's New Opportunity with Solar

There's never been a better time for nonprofit organizations to go solar. The three biggest factors driving this change are the revamped incentive structure, the reinstated 30% solar tax credit, and different funding options.

Up to 40% Direct Payment

The new incentive structure is the biggest factor that's made solar more feasible for nonprofits. Nonprofit organizations that go solar can now receive a direct payment of up to 40% of the system cost with no tax liability needed. This is broken down into the federal 30% solar tax credit with an additional 10% available if your nonprofit installing solar is in a low-income neighborhood. This is the highest amount a nonprofit has ever been eligible to receive. 

30% Solar Tax Credit Reinstated

The Inflation Reduction Act also reinstated and extended the 30% solar tax credit. Before the IRA, this lucrative incentive was at 26% in 2022, with a decrease to 22% scheduled to happen on January 1st, 2023. In 2024, it would drop again to a permanent 10% for commercial installations. 

The reinstated 30% rate allows nonprofits to offset more of their solar energy system cost. Combined with the additional 10% available for low-income neighborhoods, the typical payback period has been dramatically and can be as low as five years or less!

Funding Options

There are two main funding options when it comes to solar for nonprofits. These are primary ownership and third-party ownership. 

Under a primary ownership structure, the nonprofit pays for the system in full, whether out of pocket or through loans. The nonprofit owns 100% of the solar energy system. It can benefit from lucrative incentives, like the direct payment from the IRS of up to 40% of the system cost and 100% of the electricity savings. The nonprofit is responsible for maintenance and system repairs not covered by a manufacturer or workmanship warranty.

With a third-party ownership model, an outside entity pays to install a solar energy system for your facility, and the nonprofit buys back the electricity generated by the solar panel with fixed monthly payments. Since solar energy is far cheaper than electricity from the grid, the monthly payment is less than what you'd be paying your local utility otherwise. Since the third party owns the system, they are responsible for repairs and maintenance and keep the lucrative tax benefits from installing solar.

Sun Valley Solar Solutions for Your Nonprofit

When choosing a solar provider to partner with for your nonprofit, you don't want to choose just anyone. You'll have a decades-long relationship with your solar partner, so choosing wisely is critical.

As a member of the Alliance of Arizona Nonprofits, we advocate and support nonprofits across the state. With over 17 years in the commercial solar industry, we have the knowledge and skills to design and install a customized solar energy system to help you save money and achieve your goals.

We also have a fully in-house commercial O&M team to ensure your solar energy system has been operating at peak efficiency for decades. 

If your organization wants to take advantage of these new solar incentives, contact us today for a free commercial solar consultation.